Basis Step-Up

“Basis” is the amount of capital investment in an asset for tax purposes. For example, if Mom purchased a home in 1990 for $100,000, Mom’s initial “basis” in the home is $100,000. “Basis” is adjusted upward for improvements. A “step-up” in basis occurs when an asset is inherited after death, and the basis in such asset is upwardly adjusted to reflect the asset’s current fair market value. Using the above scenario to illustrate this concept, when Mom dies and leaves her home to you, your basis in the home will be upwardly adjusted to reflect the home’s fair-market value on the date of Mom’s death. So, if the home is worth $400,000 on the day mom dies, your “stepped-up” basis in the home is $400,000.

Capital Gains

Capital gains are the difference between the “basis” and sale price of an asset (i.e., profit).

Capital Gains Tax

Capital gains tax is a tax levied at the federal and sometimes state level on profit made from the sale of certain assets. Different tax rates are imposed depending on whether the capital gain is considered “long term” or “short term”. In general, the profit from the sale of an asset held for more than one year will be considered “long term”, while sales of assets held for less than one year will be considered “short term”.

Estate Tax

Estate tax is a tax levied at the federal and sometimes state level on the estate of a deceased person that exceeds a certain value. Currently, there is a federal estate tax of 40% for estates surpassing $12.06 Million. Many states also impose a state-level estate tax on estates exceeding certain threshold values. For example, in Massachusetts, estates exceeding $1 Million are subject to estate tax, and in New York, estates exceeding $6.03 Million are subject to estate tax.


An executor is the fiduciary – either an individual, bank or trust company, appointed to administer the estate of a person who has died leaving a will (the “testator”) to carry out the terms of their will. Your executor will need to be approved by the probate court judge so that the executor can carry out his or her duties.


A fiduciary is an individual, bank or trust company who holds a legal or ethical relationship of trust with one or more other parties. Typically, fiduciaries manage money or other assets for a person in a prudent manner. Additionally, a fiduciary has certain duties expected of them, such as to diversify assets and minimize the risk of loss, to render assets productive of income, and a duty of impartiality among beneficiaries. Examples of fiduciaries are lawyers acting for clients, guardians acting for their wards, financial advisors acting for investors, as well as executors and trustees.

Gift Tax

The Gift Tax is a tax levied at the Federal level on assets that are given away during an individual’s lifetime. Such lifetime gifts are taxable if the amount of the gift to any one person (or entity such as a trust) exceeds the annual exclusion amount of $15,000 and the lifetime exemption amount (currently $12.06 Million). Gifts in excess of the annual exclusion must be reported to the IRS; however, the gift tax will not need to be paid until the individual has exhausted his/her lifetime gift exemption


Dividends, interest payments, rents, and royalties generated by stocks, equities, bonds, real estate, and other investment vehicles.

Inheritance Tax

Inheritance tax is a tax levied on property received from an estate. The tax is based on the beneficiary’s relationship to the decedent. Only six states currently impose an inheritance tax.


The initial corpus of a trust, less any distributions and expenditures, plus any increases in capital value.


The legal process through which the validity of a will is determined by the court and a decedent’s estate is administered.


A legal agreement that sets forth the terms upon which a trustee administers trust property on behalf of a beneficiary or beneficiaries.


A trustee is the fiduciary – either an individual, bank or trust company, given powers of administration over property held in a trust with a fiduciary obligation to administer it solely for the purposes specified. This includes reviewing investments, making distributions, paying bills and the like. Unlike an executor, the trustee must accept his/her own appointment instead of obtaining court approval.